Unpacking Recession Indicators | Institutional Investor [Video]

Blu Putnam, CME Group

AT A GLANCE

• New unemployment insurance claims have stabilized at a pace close to 200,000 per week
• During the pandemic, consumption spending had outsized growth due to massive fiscal stimulus

The Fed raised rates and the yield curve inverted – an indicator of a potential future recession. Nevertheless, the widely forecasted U.S. recession did not happen in 2022, and it might not happen in 2023 either.

Recessions occur when personal consumption spending, representing about two-thirds of GDP, weakens materially. The resiliency of personal consumption is directly related to jobs, not rates or inflation. Inflation can mean one does not get quite as much for one’s money, but spending continues. Credit card rates are considerably higher and set differently than the Fed’s policy rates, so Fed rate increases do not hit consumption directly. But, if one loses one’s job, one likely spends less. If one witnesses colleagues lose their jobs, one may cut back …